The government will support the domestic automobile industry, which has been hit hard by the 25% tariff imposed by the United States Trump administration, with 3 trillion won in emergency policy financing. The subsidy system for electric vehicle corporate discounts, which was set to end in June of this year, will also be extended until the end of the year. The subsidy support ratio will also be expanded from the current 20-40% to 30-80%.
On the 9th, the government announced an "emergency measure to strengthen the automobile ecosystem" during an economic ministers' meeting chaired by Vice Prime Minister and Minister of Economy and Finance Choi Sang-mok.
Automobiles and automotive parts are the top export items to the United States from South Korea. Last year, automobile exports to the United States reached $34.7 billion, while parts exports amounted to $8.2 billion. The U.S. government's imposition of a 25% tariff is expected to have a significant impact on the domestic automotive industry.
◇ Actively support corporations facing management crises
The government has decided to provide an additional 2 trillion won in policy financing for the domestic automobile industry to support urgent liquidity. The originally allocated 13 trillion won for automobile industry policy financing will increase to 15 trillion won.
Separately, Hyundai Motor and Kia Motors plan to establish a 1 trillion won win-win fund in collaboration with financial institutions such as NongHyup Bank and Korea Credit Guarantee Fund, Korea Technology Finance Corporation, and Korea Export Insurance Corporation.
Support for the "emergency management stabilization fund" provided to small and medium-sized enterprises affected by tariffs will also be expanded. The payment deadlines for corporate taxes and value-added taxes for tariff-affected companies will be extended by up to 9 months.
The government will also pursue policies to absorb automobile inventories that may accumulate due to a decline in exports domestically. First, the electric vehicle subsidy system, linked to the manufacturer discount amount, will be expanded from the first half of this year until the end of the year.
The government will reduce the special consumption tax on new car purchases from 5% to approximately 3.5% until June. Additionally, in the public sector, there will be an initiative to replace vehicles due for replacement with new cars within the first half of the year.
◇ Responding to market shocks by stimulating demand
Support for exploring new markets will also be expanded. First, agreements reached with the United Arab Emirates will take effect early, and negotiations that had been stalled with Mexico will also be resumed.
Export support projects such as exhibitions and trade delegations will be concentrated in regions with high applicability of free trade agreements (FTAs) like the Philippines, UAE, and Ecuador. Additionally, the budget for export vouchers will be significantly increased. A total of 240 billion won has been allocated to the export voucher project this year, and more than 100 billion won will be added. Measures will be taken to alleviate the burden of export logistics, including providing dedicated shipping for parts companies.
In addition, self-driving technology will be designated as a national strategic technology to support technology acquisition. Along with tax incentives, an investment of 500 billion won will also be made to secure self-driving technology and expand the supply chain of key components for future vehicles.
The government also plans to expand the scope of clean production facilities for automobiles, subject to tax incentives in the metropolitan area, considering the need for a transition to a green industry, to include other production processes such as assembly and body.
A government official noted, "We will promptly promote improvements in laws and systems to ensure that the emergency measures for strengthening the automobile ecosystem are executed smoothly and will regularly monitor the implementation status," adding, "We will ensure that necessary support is provided at the necessary times to effectively address tariffs."